Motorboats ferry gasoline through the tributaries of the Orinoco River.Photographer: Andrew Rosati/Bloomberg

24

Sep-2015

Smuggled Venezuelan Gasoline Fuelsan Entire Economy Next Door

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Venezuelan President Nicolas Maduro has deployed thousands of soldiers, shuttered large swaths of his country’s border with Colombia and deported hundreds of migrants in his latest crackdown on contraband. He may now be starting to look at a different border where Venezuela’s almost free gasoline has been flowing liberally.

With little enforcement, smugglers unload in broad daylight

Troops have begun to build up near Guyana’s western frontier, where entire towns subsist on smuggled Venezuelan fuel and market stalls are packed with goods brought in illegally. For years, authorities in the tiny, English-speaking South American nation not only looked the other way, they virtually embraced the practice.
“We ain’t got a gas station,” laughed gas-seller Emanuel Slyvain, 52, as he siphoned Venezuelan fuel from a greasy drum on the outskirts of Mabaruma, a border town. “No one even bothers.”
Residents have come to rely on a steady flow of motorboats that ferry gasoline through the tributaries of the mighty Orinoco River. Smugglers say they risk jail time or extortion from Venezuelan security forces. But, in Guyana, convictions are so rare that unloading is done in the light of day.

Plastic Barrels

“We’re just one boat, but boats like ours come almost every day,” said Leroy Williams, 23, as he and his crew dropped off dozens of dirty plastic barrels on a Mabaruma riverbank.

In Venezuela, it costs only pennies to fill a car tank because of huge government subsidies. Using the smuggled gasoline in Guyana is theoretically against the law. But in much of the rugged Essequibo region -- home to the country’s mining and timber industries -- the law goes almost completely unenforced. Instead of the dollar-a-liter paid at pumps in the capital, gas is sold for half that.

Guyana imported 4.9 million barrels of fuel in 2014. Officials declined to estimate how much is smuggled. For Venezuela, it’s problematic enough to give the gas away to its own people at a cost of $15 billion a year. But when it also seeps through borders to its neighbors, that cuts further into what the government could sell at full price in international markets to obtain much-needed dollars for an economy ravaged by shortages and soaring inflation.
For years the “border trade” as it’s called has sustained rural Guyanese outposts like Mabaruma, where Venezuela gasoline powers cars, motorboats and home generators. Locals and business groups say the policy is a lifeline to isolated areas the government can’t supply. Watchdogs, however, are critical of the practice.

“It sets the region, and by extension the entire nation, in a vulnerable position,” said Calvin Bernard, president of Transparency Institute of Guyana Inc., a nonprofit devoted to exposing corruption. He says it risks making citizens more dependent on a neighbor than their own government -- at a time when Venezuela is renewing a centuries’ old claim to nearly two-thirds of Guyanese territory, including the border area.

Oil Find

A huge natural-gas and oil discovery off of Guyana’s coast has prompted the renewed Venezuelan claim and could change the nature of the Guyanese economy. The new government, in office a few months, blames its predecessor for the failure to enforce the law against smuggling and says it would like to make a change.

David Patterson, Guyana’s recently appointed minister of public infrastructure, said in an interview that high taxes and lax policing around mining communities ultimately allow thousands of barrels of illegal fuel to enter Guyana every day.

“It’s purely a matter of prices,” he said, adding that he intends to increase security and remove duties on products such as diesel to undercut the incentive for using smuggled fuel.

Skeptics abound, given that Venezuela still has the world’s cheapest gasoline.

Hefty Profits

The promise of hefty profits often trumps anti-smuggling efforts by Venezuelan and foreign governments alike: Gasoline makes its way through the Andes into Colombia, over lush grasslands to reach Brazil and even across the Caribbean to Aruba.

When asked about government efforts to crack down on contraband, Mark Wong, a 41-year-old mechanic in Mabaruma, shook his head.